Entries filed under 'Interest Rates'

The U.S. Federal Reserve’s January policy statement acknowledged global market turmoil and implied a less aggressive pace of rate hikes.

What a difference a month makes. The world in which the U.S. Federal Reserve (Fed) conducted its two-day policy meeting on January 27 is quite a different place than the one that characterized its previous meeting in mid-December.

The long-awaited interest rate hike by the U.S. Federal Reserve is now a reality. Perhaps more important to investors, policymakers indicated that they may not be in a rush to tighten further.

As the NASA hands at Mission Control might say, “We have liftoff.” The U.S. Federal Reserve’s (Fed) policy-setting arm, the Federal Open Market Committee (FOMC), delivered its long-promised 25 basis-point increase in the fed funds rate at the conclusion of its meeting on December 15–16. The Fed’s last rate hike was in June 2006.

The anticipated tightening move by the U.S. Federal Reserve on December 16 would feature some new wrinkles. Here’s an explanation of the process.

A December rate hike by the U.S. Federal Reserve (Fed) will be the first such move since June 2006. For many advisors, it will be the first rate hike in their career. It also will mark something of a first for the Fed, too.

Strong growth in nonfarm payrolls, and an uptick in hourly earnings, increases the odds of a December rate hike.

Will we have “liftoff” at last? The 271,000 monthly gain in nonfarm payrolls in the U.S. employment report for October, released Friday, November 6 by the U.S. Bureau of Labor Statistics, boosts the likelihood of a rate hike by the U.S. Federal Reserve (Fed) at its December policy meeting.

A change in language in the U.S. Federal Reserve's October policy statement may signal a greater probability of a December tightening.

The U.S. Federal Reserve (Fed) sent financial markets a “save the date” card on October 28. The date in question is December 15–16, when the Federal Open Market Committee (FOMC), the Fed’s policy-setting arm, will hold its next policy meeting.

The September jobs report was both disappointing and alarming to many investors. Expectations were for another month of 200,000 or more new jobs, with confidence that the weak August report would be adjusted higher. Neither expectation was met, however.

The U.S. Federal Reserve chair attempted to clarify the central bank’s policy stance on September 24. Investors appear far from convinced.

In an academic speech at the University of Massachusetts, on September 24, U.S. Federal Reserve (Fed) chairwoman Janet Yellen did her best to provide clarity on the direction of Fed policy. The fine-tuning came one week after a communiqué from the Fed’s policy-setting arm, the Federal Open Market Committee (FOMC), on September 17—and a subsequent press conference from Yellen—that left investors dazed and confused.

Besides leaving the fed funds rate unchanged, the U.S. central bank also signaled a measured pace to future interest-rate hikes.

The long-awaited rate increase—“liftoff”— will have to wait at least another month. Although low unemployment (5.1%) and improving labor conditions provided justification for the U.S. Federal Reserve (Fed) to raise rates, the central bank’s policy-setting arm, the Federal Open Market Committee (FOMC), opted to delay taking the first step to policy normalization at the conclusion of its policy meeting on September 16–17.

By starting small, the U.S. Federal Reserve could initiate interest-rate hikes without sparking market volatility.

The U.S. Federal Reserve (Fed) needs to replenish its policy ammunition. To achieve that, it will have to raise the fed funds rate from its current near-zero level. Such a move will help the central bank restore its traditional policy approach of adjusting the benchmark interest rate to help speed up, or slow down, U.S. economic growth, while ensuring that price stability and employment growth are maintained.

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